Living in Poland I have seen a lot of changes. The one thing that strikes me the most is the real estate market in Poland. I am not in the business of real estate, rather I have a Master’s degree in Economics and passively observe market changes. After about four years of watching the pull back from its bubble I think it is still not ready to do anything but continue its downward path. I am very pro Poland, but being realistic about the economic situation in the land and housing market.
Why Polish real estate is not ready to recover
It is all about supply and demand. This is what determines prices and nothing else. Cost and value are notions that are through back from Marx’s economic theory that the price of an object was determined by the labor or cost to make it. Modern economic theory says value is subjective and determined only by supply and demand. This applies to housing prices also.
- EU is not only in crisis but the Euro might fall apart, and leave the EU in shell shock for a few years, maybe ten. Countries that were throwing money into the Polish land rush are now fighting to save their own houses and collapse. Ireland, Scotland and England were the main speculators and now their lands are in trouble.
- Supply of housing has increase in Poland based on speculation that there is a huge over capacity of residential and commercial units. Because of the economics of the business cycle plans that were started years back are being completed now and the result is a huge over capacity. Empty lots and luxury appartements can not even be rent. Why would they be?
- Demand is continuing a down. I see large buildings that are brand new, falling apart a little as they have been empty for years. My friends are building new houses themselves in the suburbs rather than living in over priced city flats. Credit has not and will not ease any further. The population is not growing. Unemployment is about 13% which is not the best for a high prices.
Polish house with red roof
When I get the cash I will most likely build a house in the countryside, cheap. A house designed to my specifications and liking not some builders conceptions (to maximize profits) of a boxy house with small windows and a over sized red rood. I will build my dream home, eco friendly and in American style home. I want Polish people to do the same, that is have their dream home in their idea not someone builders idea and they pay it off with a mortgage for 30 years of hard work. Its very unfair to the people that live here.
I will build some American style house in Poland if I am lucky
Is this all bad? Not at all I am a patriot. I love Poland. However, prices are adjusting to normal levels from inflated highs based on foreign speculation. A unit in a city should be about 2000 Polish złoty a meter, but it is still about 5,500 pln a meter. The average person can not afford real housing because the Polish real estate agents and developers are trying to keep the prices inflated at all costs.
My brother in law build a home in the Polish countryside for under 1000 pln a meter. Its beautiful and not far from Krakow, where he works. Granted he did a few things himself but mostly local guys did it for him. A full house done by a builder now is about 2000 pln a meter.
How long will the prices of land and buildings in Poland stay inflated
Price will stay excessively high until they come down to 1/3 the level they are at now. So if a unit costs 6,000 a meter it will have to come to 2,000 a meter. I have seen the same situation in the USA. Prices in Florida and California are cheaper than Poland. These are luxury condos on the beach. I have seen bear markets last 10 or 15 years or never recover. People are fooling themselves if they think they can just wait it out. Take a look around you in Europe what is happening. It might take years if ever.
The good news is only the builders and Polish real estate agents lose. The Polish people will get reasonably price real estate again.
10 responses to Real Estate Poland
It’s not going to fall, don’t worry, if they join the E.U and accept the Euro then they will fall, the Euro as a common European currency was a horrible idea…
If Poland uses Euro = Poland has Economical and Financial Crash
If Poland doesn’t use Euro = Poland will recover but SLOWLY
Poland is doing well because Polish people work hard and are not crazy with credit. They did not spend too much in government relative to their debt and individuals did not take too much credit. The Poles had an excellent finance minister.
Real Estate is way over priced in Poland largely because of foreign speculation, fueled by easy foreign credit. New Blocks of flats everywhere largely owned by Brits working with Poles are empty.
The prices will continue to fall until a normal person can afford a unit. I said this in 2007 and its still true today.
The Euro I feel mixed about, in boom time it will be good for Poland, but during this crisis, it will not be good.
Yes, I agree with you, they should wait until the Euro is out of the crisis. The U.K isn’t using the Euro yet so they aren’t affected as badly, Poland should delay the use of the Euro like the U.K until things stabilize.
If Poland was on the Euro now it would be in crisis too. There is nothing wrong with the Euro, it was that countries using it were not honest.
Yes, exactly, that’s why the E.U should rule out unresponsiple / dishonest countries, Greece wasn’t able responsible in running the countries finances, and was dishonest when attempting to sell the Pantheon, which had a great amount of Greek History. The E.U should rule out these countries, because it will be those countries that will make it collapse.
Poland is responsible and stable because they took a more conservative way. Greece, although the people are warm and good, the government was dishonest about representing the economy. I think we are in about the 3rd or 4th inning of this whole game. Things will be clearer in 2020, but to think that all is good and fixed in the Real Estate market and the economy in general is not true.
Real estate sales have come to a halt since 2007. The population is decreasing due to mass emigration, as the reproducing age group are elsewhere and not retuning home due to low wages (minimum wage 2 euro). There is at the moment a persistent denial fueled by developers and their agents, in relation to the property bubble as developers try to squeeze the last bit of money out of the people before Europe’s last property bubble burst. Prices have gone down about 20% but another 50 % is expected.
You are a smart guy. Look I am an American and studied economics. Prices are determined by supply and demand. Popyt i Podaż. Demographically the population is going down. People are leaving the cities to the suburbs like it happened in the USA. Cities like Hartford, CT or Detroit were built up and then everyone moved out as the prices were too high. Real Estate inwestycje have been empty for twenty years and will never be filled in many cities. As everyone wants a house with a garden not a 45 meter flat in a block.
Further, I work indirectly with foreign investors. In Krakow, for example, even with every investment going up and remaining empty, there is still plans for at least 100 more large sets of blocks that will go up as soon as demand tightens. They already have approval and plans drawn out. Therefore, even if demand picks up, supply will outstrip demand.
There is no way prices will go up in the short term. Foreigner investors also have their own problems back home with structural unemployment and governments are cash strapped as demographics change and more people retire than can be supported by workers. Prices could come down another 100% or more. But more likely the price manipulation by greedy people will just let investments sit empty past 2020 and go into disrepair like I have seen in many American cities.
Meanwhile clever Poles will build their own houses in the countryside with green grass and forests at a fraction of the price.
New roads and infrastructure with EU money will further support the development of Polish real estate adjacent to the cities rather than in the cities.
There is no way I will pay 30 years of credit for a 50 meter flat in a block in the city with pollution and noise when I can take 7 years of credit for a house in the countryside with fresh air.
Further, many outsourcing centers and business are moving out of the city center for cheaper land and office parks in the suburbs. The city will be left for the poor, like has happened in countless American cities.
Its almost 5 years since the peak of 2006 or so and there is not sign of recovery for a reason. Supply and demand in the Polish real estate market is in long-term disequilibrium.
It is a very dangerous market and investment.
Real Estate Poland
The price to build “your own house” is still a crazy price. That will also come down, as the Poles in the West lose their jobs and have to return to Polish wages, hence Polish mortgages. The prices in the East are at least 50% influenced by Polish earning in the west..I guess this is common Knowledge..
“investments sit empty past 2020 and go into disrepair like I have seen in many American cities” thats a long time..
Piotr you are right. We are considering to move to cheap sunny Florida as the price of a home is much cheaper than a small Polish home. The reason is builders etc somehow justify price based on some inflated cost. Price in real estate or any price is always determined by supply and demand. Right now there is a large disequilibrium in the Polish real estate market. The average Polish worker, unless he take 30 years of credit can not afford anything, and further if he does buy something it is a small flat in a block of flats.
Building costs are higher than the USA. I priced it out. Go figure. Someone at the top, is making a lot of money while most people are under housed in Poland.
When Polish demographics change it will continue to perpetuate this market disequilibrium. I told people this in 2007 and they were really rude to me but it was true. The Polish real estate market might not recover past 2020.
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